The Efficient Frontier

In Modern Portfolio Theory, the "Efficient Frontier" is when a portfolio maximizes the amount of return for a given level of risk. I must give credit for any knowledge I have about economic theories to my dad, who has an insatiable interest in the topic. I believe there is a similar "Efficient Frontier" when it comes to families. Each set of parents has the most efficient breakdown of children, in which they can maximize their children(return) to the amount of cost(risk). For instance, do you ever see a mom driving a suburban with just 1 child in the back? Doesn't it seem wasteful? Such a big car, for only 1 kid?! That family is not operating at the efficient frontier.

Determining Your Efficient Frontier
There are several variables to assess when determining your family's efficient frontier. How many children can you fit in the bedrooms of your house? How big are your vehicles? How many car seats will fit? At some point as you create your family, you may reach capacity in your home or your car. The point of capacity in your home and car, is your family's efficient frontier. At that point, just 1 more child will require you to move or buy a new car.

There are other factors to consider with the efficient frontier as well. Certainly multiple children of the same sex can share more clothing, which decreases costs. I've also heard that boys are not as expensive as girls (however that is more optional spending I believe). When it comes to the spacing of children (age difference), there is an optimum spacing, maybe 2-3 years, in which they can share cribs and car seats. Too close in age and the previous child is still using their crib, too far apart and there are other things to consider, such as time away from work for the mother. If you're like me and you'd like to work only part time (or take a break) when your children are young, the closer in age, the fewer years away from work you have before they reach school age.

Our Efficient Frontier
As I consider these factors for our family, the Shaw family efficient frontier is 2. Our home has 2 large bedrooms, so 2 children could comfortable share the other bedroom upstairs. If they are both girls, I think they could share into their teenage years (I don't think opposite sexed children should share once they reach puberty). And both of our cars could fit 2 children comfortably, even if both are in car seats.

But we want 3 kids! One more than our efficient frontier... what should we do? Of course, we will adjust and plan for our family. When we buy a single family house, eventually, we will look for at least 4 bedrooms, even if we have only had 2 children at that time. We may operate below efficiency initially, but hopefully we will find a house we can call home for the remainder of our child rearing years.

We will also be considering school options when we move, since the public high school in our area is known for having crime and disciplinary issues. We will need to assess whether private school tuition would be more cost effective than buying into a school district with a well-rated school. For families with this consideration, the more children in the family, the more worthwhile a good public school option is, since tuition is paid on a per-child basis.

Conclusion
Can we base our decisions on what is best for our family based on a formula? Of course not. We should, however, recognize these expenses and how we can make our families most efficient. We should consider the resources God has given us, and make the best use of them, which could mean staying in a smaller house longer, while I work part time.

One thing I have been considering lately is that God is not concerned with making us 'happy' but, he does want us to be joyful. When we consider our lives, our decisions, and the long term, we should consider our long term joy, over our short term happiness. This could mean directing our resources to support a cause we believe in, rather than the fancy SUV with warming seats and a DVD player.

So what do you think? What is your efficient frontier?